Now Oracle is refusing to host the one part of the system that both parties agreed worked fine: enrollment for Medicaid, which provides health coverage for the poor. Oregon's new lawsuit claims Oracle backed out of a promise to renew its contract.

When Oregon's contract with Oracle for Medicaid enrollment expires at the end of February, Oracle says it will not renew it. The system will go offline unless the state can figure out how to quickly move it (not likely) or get a judge to force Oracle to keep hosting it. This system is used to process new Medicaid applications and renew existing ones. All told, the system processes 26,000 low-income people each week, according to the state’s suit.

Oracle, naturally, says it made no such promise, and it blames the state for failing to "anticipate and plan" for the end of the contract — especially since the two parties were already in litigation.

As part of that litigation, Oregon is contemplating forever banning Oracle from all future contracts with the state.

Here's how the dispute began. Oracle was supposed to build a state system that lets people buy health insurance that would be the envy of all the other states.

Instead, the state spent about $200 million on the system, and paid Oracle more than $130 million before pulling the plug and filing a lawsuit over supposed problems with the site, the Oregonian reports.

Oracle — which says the state still owes it about $25 million — filed a counter suit saying the site worked fine, and that Oregon pulled the plug for political reasons. However, after missing deadline after deadline, the site was limping along, requiring people to use paper forms for at least part of the application process. Oracle says it had urged the state to hire a professional IT project manager, a systems integrator, but the state chose to manage the project on its own. Oracle blamed poor project management for most of the website's problems.

In a letter responding to the second lawsuit, Oracle attorney Dorian Daley points out the irony in suing Oracle while also trying to force it to continue working for the state.

"After accusing Oracle of fraud and racketeering, and asking the court to protect the public from this alleged malfeasance by preventing Oracle from doing business with the State in the future, you are insisting that Oracle sign a new contract to continue working for the State for another year," she writes.

Indeed, Oracle has point: The state was trying to ban Oracle while making no plans to hire an alternative.

This healthcare exchange was supposed to be a point of pride for the state and the company. Business Insider has talked to Oracle employees who tell us they feel ashamed of the whole debacle and their company's role in it, whoever is ultimately to blame.

Here's the full scathing letter Oracle sent to the state and also sent to us when we asked Oracle for comment.